Definition of Distribution Channels, Factors, Types and Distribution Strategies
MARKETING • SMA / SMK
Distribution channels have an important influence on trading activities. This distribution channel becomes a special intermediary between consumers and producers. That is, without a distribution channel, then goods produced by producers cannot reach consumers.
To better understand distribution channels, this time we will learn about the definition of distribution channels , factors that affect distribution , types of distribution channels and also distribution strategies .
Definition of Distribution Channels
Understanding distribution channels can be seen from the opinions of economists. Following is the definition of distribution channels according to experts.
- Nitisemito (1993, p.102), states that the definition of distribution channels are distributor institutions or distribution institutions that are engaged in distributing or delivering goods or services from producers to consumers.
- Warren J. Keegan (2003) argues that distribution channels are channels used by producers to distribute their production goods, from producers to consumers or to industrial users.
- Assauri (1990: 3) states that distribution channels are institutions engaged in marketing products, in the form of goods or services from producers to consumers.
- Kotler (1991: 279) states that the definition of distribution channels is a group of companies or individuals who have ownership rights to products or help transfer ownership rights of products or services when they are transferred from producers to consumers.
Determinants of Distribution Channels
In this distribution channel, there are certain determinants that are driving the activities in this distribution. Following are the determinants of distribution channels:
- Small producers or companies that only have limited financial resources are unable to develop direct sales organizations.
- Distributors find it more effective in wholesales sales because they adjust the scale of operations to retailers and their specialty.
- Entrepreneurs or manufacturers with sufficient capital would prefer to use their funds to expand rather than carry out promotional activities.
- Retailers who sell a lot often prefer buying various kinds of goods from wholesalers rather than buying directly from each factory.
Related article: Definition of Marketing Audit, Its Purpose and Form
Types of Distribution Channels
There are also various types of distribution channels. Types of existing consumer goods distribution channels include:
a. Producer – Consumer
Producer-consumer distribution channel forms are the shortest and simplest type of distribution channel because they do not use intermediaries. In this type of distribution channel, producers sell the goods they produce by mail intermediaries or go directly to consumers’ houses (from house to house). Therefore, this channel is also called a direct distribution channel.
b. Manufacturers – Retailers – Consumers
In this type, the producer only serves sales in large numbers made to retailers, and does not serve sales to consumers. Furthermore, purchases made by consumers are served by retailers only.
c. Manufacturers – Wholesalers – Retailers – Consumers
This type of distribution channel is widely used by producers, and is called a traditional distribution channel. In this case, the producer only serves large sales done to large traders, and does not sell to retailers. Purchases by retailers are served by large traders, and purchases by consumers are served only by retailers.
d. Manufacturers – Agents – Retailers – Consumers
In this type of distribution channel, producers choose certain agents as their distributors. He runs large trading activities in existing distribution channels, namely only to his agents. Then, the sales target is mainly aimed at large retailers.
e. Manufacturers – Agents – Wholesalers – Retailers – Consumers
In this type of distribution channel, producers often use agents as intermediaries in distributing their production goods to large traders. Then, these big traders sell it to small shops. Agents that play a role in this distribution channel are mainly sales agents (Swastha and Irawan, 1997, p.295-297)
Retail / Retail Distribution Strategies
To get the maximum or greater profit, the right distribution strategy is needed. This distribution strategy plays an important role in the mission of delivering goods or services to consumers.
Here are some distribution methods or distribution strategies that can be chosen by a business company so that it can further maximize the profits obtained.
a. Intensive Distribution Strategy
Intensive distribution is a form of distribution strategy that places merchandise in many retailers or retailers and distributors in various places. This distribution strategy technique is very suitable to be used for products or daily staples, especially those that have high demand and consumption levels.
Examples of products that commonly use an intensive distribution strategy include: groceries, cigarettes, toothbrushes, toothpaste, soap, detergent, and so on.
b. Selective Distribution Strategy
A selective distribution strategy is a method of distribution that is carried out by distributing products or services to only certain marketing areas and is done by selecting only a few distributors or retailers in an area.
Among these distributors or retailers, there will generally be a competition to win consumers with their respective ways, techniques and strategies.
Examples of selective distribution channels that are commonly used are electronic products, motor vehicles, clothing, bicycles, books, and so on.
c. Exclusive Distribution Strategy
Exclusive distribution strategy is a distribution strategy that is carried out by giving the distribution rights of a product to only one or two distributors or retailers in a certain area.
Goods or services offered in this type of exclusive distribution are generally goods that have high quality and price and with a limited number of consumers.
Examples of products in exclusive distribution can include car showrooms, factory outlets, restaurant franchises, multi-level marketing products, mini markets, supermarkets, hypermarkets, and so on.